News and developments
Korean Tax Regulation Updates for 2024
The main contents of the Regulations that may be of interest to foreign investors are summarized below:
-
- CITL-PD (Presidential Decree of the Corporate Income Tax Law)
- IITL-PD (Presidential Decree of the Individual Income Tax Law)
- VATL-PD (Presidential Decree of the of the Value Added Tax Law)
- ITCL-PD (Presidential Decree of the International Tax Coordination Law)
- NBTL-PD (Presidential Decree of the National Basic Tax Law)
- STTCL-PD (Presidential Decree of the Special Tax Treatment Coordination Law)
- Individual Income Tax for Foreigners
- Non-taxation of corporate housing provided when applying the special flat tax rate for foreigners (Article 16-2 of STTCL-PD)
- Double taxation avoidance due to Russia’s suspension of tax treaty implementation (Article 117 of the IITL-PD and Article 94 of the CITL-PD)
- Expanded coverage of “New Growth Engine/Emerging, Proprietary, and National Strategic Technologies” for the purpose of tax credits (Appendices 7 and 7-2 of the STTCL-PD)
-
- The “defense industry” has now been incorporated into the categories for new growth engine/emerging and proprietary technologies. Furthermore, 15 new technologies have been added, and the scope of the existing 8 technologies has been broadened.
- The 15 “new technologies” include i) large nuclear power plant manufacturing technology, ii) non-coding robot automation technology, iii) nano-silicon cathode material manufacturing technology, iv) ammonia power generation technology, etc.
- The broadened scope of existing 8 technologies include i) technologies related to autonomous driving records in the field of future automobiles and ii) new drug candidate manufacturing technologies in the field of robotics.
- In the category of national strategic technologies, 4 new technologies have been introduced, and the scope of 1 existing technology has been expanded.
- The 4 new technologies include technologies for equipment and components for the OLED pixel formation and encapsulation process in the display sector, design and manufacturing technology for hydrogen gas turbines (blended and all-electric) in the hydrogen sector, hydrogen reduction steel technology, and hydrogen storage efficiency technology.
- The expanded scope of 1 existing technology includes HBM (High Bandwidth Memory) to next-generation memory semiconductor design and manufacturing technology.
- Additional Tax Credit Allowed for K-Contents Production Expenses (Article 22-10 of STTCL-PD)
-
- At least 80% of writer/author labor expense is paid for Koreans
- At least 80% of actor/actress salary is paid for Koreans
- At least 80% of post-production costs are expensed in Korea
- Owns at least 3 major IP rights (among broadcasting rights, transmission rights, performance rights, reproduction rights, distribution rights, and derivative works rights under the Copyright Law)
- Increase Tax Reduction for Businesses Set up in the Jeju Investment Promotion Zone (Article 116-15(1) of the STTCL-PD)
- Allowing Special Rules for CFC (Controlled Foreign Company) Foreign Holding Companies (Article 64 of the ITCL-PD)
- Global Minimum Tax
-
- The Regulations now include a clarification regarding the special case where permanent establishment (“PE”) losses are incorporated into the calculation of the GloBE income of a headquarter (Article 107-2 of the ITCL-PD);
- The Regulations specify the method for allocating the top-up tax to subsequent fiscal years in scenarios where the top-up tax rate exceeds 15% (in the case where the adjusted covered tax is negative and net GloBE income is positive) (Article 116-2 of the ITCL-PD);
- The criteria for the Qualifying Domestic Minimum Top-Up Tax (QDMTT), which is exempt from the global minimum tax's top-up tax, have been clarified. (Article 118-2 of the ITCL-PD); and
- The methodology for calculating GloBE income and losses has been clarified in instances where the tax laws of the country hosting a Constituent Entity (CE) (which includes an Ultimate Parent Entity (UPE) of a Multinational Group, any entities consolidated under the UPE and PEs thereof) mandate adjustments to the carrying amount of assets and liabilities at fair value (Article 129(4) of the ITCL-PD).
-
- Full disclosure of GloBE income and loss calculations to the Korean tax authorities;
- The reporting CE informs the Korean tax authority of the fact that an error has been made in the GIR filed, and it is recognized that there is a reasonable cause for the reporting CEto make such error or mistake;
- The domestic CE demonstrates to the Korean tax authority that the failure to comply is due to an unclear provision of an internationally agreed GloBE, rule and the demonstration is based on a reasonable interpretation of such unclear rule;
- The domestic CE makes a representation to the Korean tax authority that the failure to comply with the internationally agreed GloBE rule was caused by the domestic constituent entity’s lack of knowledge of such rule, and the representation is reasonable in light of the early implementation of the GloBE rule.
- The domestic CE demonstrates to the Korean tax authority that its noncompliance with the obligation to file a GIR does not relieve it of the burden of paying top-up tax during the transition year or subsequent years.
-
- Implemented in a manner consistent with the results under the internationally agreed GloBE rules;
- the adopting country does not provide any benefits (including tax incentives and subsidies) that are related to GloBE rule to CE bearing a top-up tax.